Beverley Hughes: We want to put more power in the hands of young people to give them more say. We will support local authorities to pilot opportunity cards to enable young people to take part in more positive activities, and we will provide a local opportunity fund, backed by a capital fund, to be spent in conjunction with young people. We will ensure that provision meets national standards and responds to local demand by placing a statutory duty on local authorities to secure access for young people to positive activities.

Stephen Hesford: I am obliged to my right hon. Friend for that answer. I welcome the Green Paper "Youth Matters", but more importantly students in my constituency welcome it. As she may know, I have carried out a consultation in four schools in my constituency, three of which I have visited and one of which has made a written submission. In light of the enthusiasm that they have shown for the questions posed by this enlightened Green Paper, will she assure me that the avalanche of responses that she will have from my students will be fully taken into account?

Beverley Hughes: The supply-side mechanisms that we have included in the Green Paper are important, precisely because they will require local authorities and others to take account of which activities young people decide to take up. So that has been an important ingredient. However, I take my hon. Friend's point that the supply side is also important. It is encouraging to note that during 2003–04 and 2005–06 local authorities increased their funding by 12 per cent., and the out-turn for 2003–04 was considerably higher even than the budget requirement. There is growing recognition that more needs to be done to invest in activities and opportunities for young people, and local authorities are taking that very seriously.

Beverley Hughes: Clearly, there are many views on the issue. I spent some time discussing it with young people during the consultation process, and there is considerable support for a vote at 16, but I do not think that anyone would want to introduce that until we could ensure that young people would use it in significant numbers. As we know, there are tremendous pressures on young people, and that is not top of the list for many 16 and 17-year-olds, although I accept that it is an issue for some. We will have to go down that route when we are sure that that is what the majority of young people would not only want but use.

Phil Hope: Involving young people in decision making is essential if we are to ensure that services meet their needs, and local authorities are required to consult young people while developing their children and young people's plan. As my right hon. Friend the Minister for Children and Families has just been saying, the new youth opportunity card, announced in the "Youth Matters" Green Paper, will develop that involvement further. I urge all hon. Members to encourage their local authorities to involve young people in decision making, and I draw attention to the participation works initiative, launched only yesterday, which provides online useful services to help young people involved in participation.

Phil Hope: As my hon. Friend will know, young people become disengaged for a wide variety of reasons, and they often need individual personal support to work out their needs and to gain access to opportunities such as education, training and jobs. My hon. Friend is right to suggest that local partnerships such as children's trusts should provide opportunities for young people to access those services at the best time and in the best place. She might like to consider ways in which young people can be involved in planning such services by taking part in discussion and working groups with youth workers and others to find out what their needs are and how to meet them. In Lancashire, some of those partners are setting up an internet TV project to generate views about such issues so that services can be responsive to their needs.

Ruth Kelly: I send my personal congratulations to all the pupils and teachers at the school in my hon. Friend's constituency. It is a tremendous achievement, although I hope that it is only the first step on a long journey to securing even better results. My hon. Friend is right: in rare but nevertheless too many cases schools have languished in special measures, not only for one or two years but sometimes for five or six. That must come to an end. That is why I proposed in the Education White Paper that, if a school had not made rapid progress within a year of being put into special measures, something radical should be considered, including federating with a more successful school, which my hon. Friend gave as an example.

Anne Snelgrove: Will my right hon. Friend join me in congratulating Churchfields school in my constituency of which I am a governor? It almost doubled its GCSE results from 26 per cent. in 2004–05 to just under 50 per cent. this year. Will she reassure me and my constituents that the Government will continue to support and promote with employers and parents vocational GCSEs as an equal alternative to traditional GCSE courses? That is what they want and value.

Ruth Kelly: I certainly send congratulations to Churchfields school on its remarkable success in improving its GCSE results. My hon. Friend is right. Vocational qualifications are hugely important and they have been undervalued in this country for generations. We need to start taking them seriously. That is why, later this autumn, I shall publish a delivery plan for implementing our 14 to 19-year-old specialised diplomas. They will, for the first time, give our young people genuine chances to study vocational qualifications of a high quality, which lead on to the next qualification and can even take students into higher education.

David Taylor: Sadly, earlier this week, the Secretary of State for Education and Skills announced her plans to enfeeble and marginalise local education authorities. While she still has the opportunity, would she care to pay tribute to the county of Leicestershire—which is not Labour controlled—for successively achieving record GCSE results despite persistently being the worst funded shire county authority under both the previous Conservative Administration and our own? Finance and results do not always go together.

Ruth Kelly: I have a lot of respect for my hon. Friend, who I know takes these issues extremely seriously. I pay tribute to the work that has been done in Leicestershire to achieve this year's record results, and I hope that the county will move from strength to strength. I should like to reassure my hon. Friend that there is a real role for local authorities in the Education White Paper. I should also like to cite the view of the Local Government Association, which stated that it welcomes the new strategic role that has been given to local authorities.

David Clelland: The Secretary of State will be aware that many Labour Members have grave concerns about her proposals and cannot possibly support them in their present form. There is no question but that she and the Prime Minister have the best interests of young people at heart, but many of us fear that the proposals could be damaging to many young people in Tyne Bridge and similar constituencies up and down the country. Will she undertake to enter into meaningful discussions with colleagues, particularly on the Labour Benches, before she pins her colours too firmly to the mast in this White Paper?

John Maples: I do not imagine that during discussions with the Prime Minister the Secretary of State had much time left over from putting out the row with the Deputy Prime Minister to discuss the problems in Stratford-on-Avon schools, but had she done so she would have found that there are three schools, all of which are completely full. The situation is getting worse because of Government housing targets. The high school, which is in a new building, simply cannot expand; the girls' and boys' grammar schools could.
	In answer to a question on Tuesday, the Secretary of State said to me that she is continuing her predecessor's policy of not allowing the freedom of popular schools to expand to extend to grammar schools. So, we have a ridiculous situation in Stratford: the one school that cannot expand is free to do so and the two schools that can expand are not free to do so. What do parental and community choice at local level mean if such blind prejudice overrides them?

Brian Iddon: My right hon. Friend knows that I wrote to her when she was appointed to express my concerns over the choice agenda, particularly regarding the schools in her constituency and mine, and in Bolton's third parliamentary constituency. She is, of course, to allow good schools to expand. That will be detrimental, I feel, to the schools in my constituency of Bolton, South-East. How does she define a good school?

Ruth Kelly: My hon. Friend is right to have concerns about his constituency, but those concerns are not substantiated in the White Paper. Indeed, in Bolton we have good leadership capacity expanding throughout the system, with the head teacher of Rivington and Blackrod high school becoming executive principal of Labybridge school—a new school that was in special measures over a number of years—and driving up standards, including a 5 per cent. rise in GCSE results this year. It is now able to help other schools to improve as well.
	That is the system that I would like to be much more easily available to all schools in the country, so that good leadership can expand, we can bring up the capacity of underperforming schools and every pupil has the opportunity to share in that success.

Edward Davey: Will the Secretary of State confirm that, under the White Paper, she is not proposing to make the admissions code legally binding on schools? Will she also confirm that, under the White Paper, every school in the country could become its own admissions authority and be able to set its own policy with her as the ultimate arbiter? If that is all true, how can we be confident about fair admissions, given her recent ruling on the Oratory school in which she backed selection by parental interview—against her own admissions code?

Helen Jones: Does the Secretary of State accept that many of us have concerns about her White Paper, because it talks about schools as if they exist in isolation? If a school proposes to become a trust school or to expand, what consultation does she propose to carry out with parents at other schools who might be affected by that expansion? What procedures does she intend to put in place to protect those children in schools whose numbers might be falling?

Michael Foster: My hon. Friend will know that adult learning courses are provided at Worcester sixth form college and Worcester college of technology, both of which are in my constituency and both of which are excellent institutions. There is, however, no post-16 provision in local secondary schools, although that does not apply elsewhere in Worcestershire. My constituents are at the wrong end of a 13 per cent. funding gap. When will it be closed?

Jacqui Smith: I share the hon. Gentleman's concerns, but we need to be clear that the specific issue under discussion does not prevent academies from providing community use of their facilities. It does limit their ability to charge for such use, which is an important issue that we are absolutely determined to sort out. That is why, for example, my officials are already working with the academy in the hon. Gentleman's constituency to consider ways of managing the situation, and the practicalities of academies reclaiming VAT and accounting for output tax over the economic lifetime of the building. But I share his concern and I want to ensure that we sort this matter out. We are committed to doing so, because we are committed to ensuring that academies play that role at the heart of their communities.

Jim Cousins: May I raise with my right hon. Friend another problem? These VAT rules mean that there is a strong bias in favour of new construction, rather than the improvement and conversion of existing buildings. That is why Newcastle's Liberal Democrats, when they asked the Government for a city academy, decided to close a perfectly good large school in my constituency with the largest ethnic minority student intake in the city. Will she also recognise that precisely this difficulty will apply to foundation schools and to future trust schools?

John Bercow: Given that children who languish either in institutional care or, indeed, in serial fostering arrangements face particular challenges, anything that the Government can do on that front to improve their prospects will be warmly welcomed on both sides of the House. May I ask the Minister in particular what is being done to ensure that there are plenty of opportunities for such children, first, for reading and, secondly, for adequate and monitored homework?

Mark Harper: Has the Minister read the poem "Nothing's Changed" by Tatamkhulu Africa? It appears on the GCSE English literature syllabus, and it advocates the bombing of a restaurant to advance social change. Does she think that teachers who teach the poem should be jailed under the proposed Terrorism Bill?

Chris Grayling: Yesterday the Home Office indicated that it was considering a new "three strikes and you're out" system for supermarkets suspected of selling drinks to under-age drinkers. You have told Ministers on many occasions, Mr. Speaker, that new policy initiatives should be announced in the House, not through the media. Once again, the first we heard of that announcement was through the media. Why?
	When will a Foreign Office Minister come to the House to brief us about the Government's response to the very worrying comments made about Israel yesterday by the Iranian President? I am sure the Leader of the House shares my great concern about what was said.
	Following yesterday's revelations from the Secretary of State for Work and Pensions, may we have an urgent statement from a Minister in that Department? In particular, the House needs more details about the discussions that have taken place with DNA Bioscience about possible future work with the Child Support Agency. May we also be told what steps are being taken to ensure that no conflict of interest can possibly arise over the substantial shareholding in the company held by the Secretary of State's family, which may increase substantially in value if the company succeeds in winning business from the CSA?
	Given the difficulties that both the Secretary of State and the Prime Minister's wife are experiencing, may we also have an urgent statement from the Prime Minister about the proposal to create a referee for the ministerial code? Had such a person been in post, the current embarrassment over these difficulties might have been avoided. The Leader of the House will be aware that the Committee on Standards in Public Life made such a recommendation to the Government, which the Prime Minister initially accepted, but nothing has happened since. In the summer the Committee strongly criticised the Government's failure to act. Will the Government please explain that failure to the House?
	Finally, there have been reports this week of turmoil in the Cabinet—in particular the suggestion that the Secretary of State for Health and the Secretary of State for Culture, Media and Sport squared up to each other in the battle over smoking in public places. Would it be sensible for the Leader of the House to ask the Administration Committee to investigate whether Ministers in such a position should be offered anger management counselling to ensure that the strong emotions that clearly exist in the Cabinet do not lead to someone getting hurt?

Geoff Hoon: I am simply giving the gentlest advice to the hon. Member for Epsom and Ewell (Chris Grayling).
	On supermarkets, I would not judge that that was a policy initiative. I hope that all hon. Members would recognise that it is a matter of enforcing the existing law. The convention, to which Ministers adhere, has always been that new policy announcements should be made on the Floor of the House. We are simply ensuring that the law, which has existed for a long time, is properly enforced. I hope the hon. Gentleman and other hon. Members will join me in welcoming that.
	On Iran, that is a very disturbing development. I want the House to know that my right hon. Friend the Foreign Secretary has instructed that the Iranian chargé- d'affaires be summoned to the Foreign Office, where he will be told in no uncertain terms of the displeasure that the Government feel about those statements. I have seen some details of the speech, which I thought was thoroughly sickening. Not only this country, but other countries will be protesting about it.
	I assure the House that it is my understanding that my right hon. Friend the Secretary of State for Work and Pensions has satisfied all the relevant rules relating to his position and that of his family. The hon. Gentleman raised the question of the Prime Minister's wife. I am sorry he did that. He received a letter earlier this year from the Minister without Portfolio, my right hon. Friend the Member for Makerfield (Mr. McCartney), who speaks on behalf of the Cabinet Office. Nothing new has occurred since then. There is no change in the position from what was set out in that letter.
	In my opening remarks I dealt sufficiently with the hon. Gentleman's final point.

Lindsay Hoyle: Will my right hon. Friend allow a debate on early-day motion 880 on the construction company, AMEC.
	 [That this House condemns the decision taken by AMEC to close its Adlington site; recognises that the company was established in Adlington by Leonard Fairclough 120 years ago and its subsequent success has been based on the loyal and highly skilled workforce in Adlington; expresses surprise at the decision given that brand new office facilities have only recently been built at Adlington only to find that in a short period of time they are abandoning the site; and calls on the management to repay this loyalty, review this decision and maintain their site in Adlington, helping to support the local economy.]
	AMEC has been based in the village of Adlington in the Chorley constituency for 120 years. The different generations of families who have worked for the company made it very profitable. Indeed, it is one of the largest construction service companies in the world. We found out yesterday that it is willing to close its base in Adlington, where more than 200 jobs are based. That is the way in which the company is responding to the loyalty of the work force. There is no compassion in the company. It is only right to have a debate on the company, and on the chairman in particular.

Geoff Hoon: This is a difficult issue. No one is pretending that these issues cannot be resolved sensibly. The issue is one of balancing the freedom of individuals not to suffer unwarranted exposure to cigarette smoke against the interests of not turning those people who want to smoke into pariahs in our society. That was put extremely well by the shadow Leader of the House when he made that observation, and it indicates that all political parties have their debates on this question. I should have thought that the right hon. Member for North-West Hampshire (Sir George Young) welcomed the fact that there was such public discussion of these issues.
	I regularly receive complaints that, in fact, such issues are decided behind locked doors and that there is no possibility of having that kind of public discussion. Indeed, I congratulate the Conservative party on the various approaches it takes to the issue. In Wales, the Conservative health spokesman supported the ban on smoking in public places; in Scotland, the Conservative health spokesman opposed the ban. However, those positions are models of clarity compared with that of the shadow Health Secretary, who said in a speech last month that the Conservatives would replace the Government's plans
	"either with the provision for a self-regulated approach, or a full statutory ban on smoking in public places."
	So it appears that, in this country, the Conservative party's official position is both for and against a ban.

Geoff Hoon: My hon. Friend has been assiduous in raising this issue, and I congratulate him on continuing to do so. He raised it with my right hon. Friend the Prime Minister, who made clear our determination to ensure that early payments are made and to look again at the whole question of criminal compensation cases. My hon. Friend is absolutely right: it is important not only that we provide proper, speedy and effective compensation, particularly to the victims of terrorism such as that which took place on 7 July this year, but to recognise that there are many victims of crime who deserve fair compensation as a result of their injuries.

Geoff Hoon: I certainly congratulate my hon. Friend's constituent. I have had the privilege of visiting Bilston from time to time, and I know just how strong and effective that community is. I also understand from him how effective that community is in supporting its senior citizens. I am sure that the idea can be given serious consideration.

Pete Wishart: Last week, there was a call to hold a debate on trade justice to coincidence with the mass lobby of Parliament on Wednesday next week. Predictably, looking at today's business statement, there is no such space for any such debate. Does the Leader of the House not agree that the House should be responsive to our constituents' concerns, especially when they are prepared to come to the House in such vast numbers? Will he do all that he can to persuade the Secretary of State for Trade and Industry to come to the House at least to make a statement on the Government's intentions in that respect?

Geoff Hoon: I am grateful to the hon. Gentleman for setting out his concerns in such detail. I am not sure that I will be able to do justice to the full range of issues that he raised, but let me restate the determination of my right hon. Friend the Secretary of State for Northern Ireland in the form of funding for several initiatives to help in Northern Ireland. He is demonstrating that he takes very seriously the issues that the hon. Gentleman raises.
	Let me emphasise to all right hon. and hon. Members the opportunities afforded by Westminster Hall. There are not always sufficient requests for debates there, and several of the matters that have been raised, including that raised by the hon. Member for Foyle (Mark Durkan), may be suitable subjects for debate in that forum.

Martin Linton: Will my right hon. Friend arrange for the Transport Secretary to come to the House to make a statement on navigational standards on the Thames? If he is a driver, my right hon. Friend will know that Battersea bridge is closed to motorists as a result of the tenth strike in 10 years, yet it remains perfectly legal to drive a barge in the Port of London without any training and without a licence. Apart from the current incident, which is still being investigated, all those bridge strikes have involved misjudgement or miscalculation by the person navigating the barge.

Dari Taylor: May I press the case for an early statement on the Government's position on smoking in public places? The figures are well known and very alarming. Passive smoking kills 30 people every day and kills two employed people every working day. The figures are very alarming, and we should acknowledge them. We are told in the press that the Government believe that a partial ban is feasible and a total ban is not easily policed. Those arguments should be expressed on the Floor of the House so that all hon. Members have the opportunity to hear them and, frankly, to dispute them.

Martin Salter: The Leader of the House will be aware of the Home Office's intention to outlaw the possession of violent internet pornography, as demanded by Liz Longhurst, the campaigning mother from Reading whose daughter was brutally murdered by a man obsessed with internet images of rape, torture and necrophilia, and who was recently awarded the pride of Reading prize for her inspiring work. Can the Leader of the House tell us when these matters will be brought before Parliament?

Dawn Primarolo: I beg to move, That the Bill be now read a Second time.
	At the time of the pre-Budget report on 2 December 2004, I made a statement to the House that outlined how, despite the best efforts of successive Governments since 1994, we continued to be presented with ever more complex and contrived arrangements designed to avoid income tax and national insurance on the rewards from employment. I made it clear that we intended to close down such activity permanently.
	In my statement, I recalled that earlier attempts at such avoidance took the form of paying bonuses and salaries in gold bullion, diamonds and fine wine. When those routes were closed, employers started to pay bonuses through ever more sophisticated financial instruments and securities to reduce the amount of national insurance that they had to pay, to avoid their obligation to operate pay-as-you-earn, and to reduce employees' tax bills.
	The tax avoidance disclosure rules that were introduced in the Finance Act 2004 brought to light many—more than 100—examples of such schemes that had been devised or marketed by promoters. That showed that a significant minority of employers and their advisers were continuing to devise, operate and market ever more contrived avoidance schemes to disguise what is, in effect, remuneration. Without prompt and decisive action, there was a genuine possibility of tax and national insurance contributions avoidance schemes continuing, to the detriment of the Exchequer and the many employers and employees—the majority—who pay their fair share of tax and national insurance.
	I gave notice of our intention to deal with any similar arrangements that emerged in future that were designed to frustrate our intention that employers and employees should pay their fair share of tax and national insurance on the rewards from employment. When we become aware of arrangements that attempt to frustrate that intention, we will introduce legislation to close them down and, when necessary, with effect from 2 December 2004.

Dawn Primarolo: The hon. Gentleman may know the answer from discussions during the proceedings on the Finance Act 2005. However, let me provide a short list of the sort of schemes that have been operating in relation to bonuses that are payment for employment. In 1991, such schemes used unit trusts to shield bonuses and the previous Government closed them down. In 1993, gold bullion and tradeable commodities were used and subsequently closed down. However, the schemes returned in 1994, using diamonds and fine wine. They were closed down but another type of scheme returned again in 1995 with grants of options in third-party companies. In 1996, own-company share awards and options were offered.
	All those schemes reveal a systematic and continued attempt to use contrived schemes for payment for employment, which should come within the PAYE system. The issue is whether tax and national insurance are paid on the relevant forms of income. The Bill tries to provide for that. I hope that, as I go through the provisions, the hon. Gentleman will be satisfied that the measure is specifically targeted and that it includes the necessary safeguards to ensure that. I hope that he will agree that the Bill is a proportionate and relevant way in which to tackle the problem.

Dawn Primarolo: Indeed, it is not an insignificant amount of money and it should have been paid. The vast majority of taxpayers pay, but non-payment has direct effects not only on the tax collected but on the money that goes into the national insurance fund.
	In 2004, I gave notice of our intention to deal with any future arrangements that were designed to frustrate our intention that employers and employees should pay their fair share of tax and national insurance on their rewards for employment. When we become aware of such arrangements, we will introduce legislation to close them down and, I repeat, when necessary, with effect from 2 December 2004.
	If some people think that the Government's resolve has weakened, my statement stands today as strongly as it did on 2 December 2004. We are closely examining what has happened since that date. I want employers and their advisers to be in no doubt. If they continue to avoid their responsibilities, or are thinking of doing so in future, we will not hesitate to introduce further legislation to close down their schemes.
	As a first step towards demonstrating our commitment to taking action, schedule 2 to the Finance (No. 2) Act 2005 was introduced to strengthen the income tax rules dealing with employment-related securities back to 2 December 2004. The Government had already published a draft technical note alongside the pre-Budget report last year, explaining our proposals, followed by draft legislation in February 2005. Interested parties have therefore had an extensive period in which to scrutinise and comment on the detail of the provisions, which were then fully debated during the Committee stage of that Act.
	The Bill before us is the second legislative step that demonstrates our commitment to taking action against avoidance. It is key to achieving the Government's objectives of fairness and opportunity by ensuring that all pay their fair share of tax and national insurance. It is also an essential element in building a serious and credible deterrent against future avoidance.
	As the tax disclosure provisions have demonstrated, and as we and the previous Conservative Government have discovered, it is not always possible to anticipate the range and complexity of those extremely contrived arrangements. The Government intend to close down such avoidance schemes permanently. The Bill will ensure that the Government can deal with any arrangements designed to frustrate their intentions. That will ensure that the tax and national insurance that should rightly be paid on rewards for employment are paid. There is no annual equivalent of the Finance Bill for national insurance, so the Bill provides the necessary powers to apply national insurance to payments from such schemes.
	When the Government become aware of arrangements that attempt to avoid national insurance contributions as well as tax, we will introduce regulations to close them down, where necessary from 2 December 2004. This action will not affect the vast majority of employers and employees, who organise their affairs in a straightforward and transparent way. In particular, genuine employee share schemes and share option plans will not be affected.
	The Bill provides for a power to make regulations in respect of national insurance that reflect backdated tax changes that take effect on or after 2 December 2004 and which may be outside the scope of existing national insurance legislation. The power will allow for national insurance liability to be charged starting from 2 December 2004, if necessary.
	The Bill is needed to extend existing regulation-making powers and to make it possible to impose a national insurance charge on disguised remuneration that is capable of taking effect from 2 December 2004, where necessary. Currently, a national insurance liability can usually be charged only from the date on which the national insurance regulations are made, except in limited circumstances in which the regulations can be backdated to the beginning of the tax year in which the regulations are made. This is in contrast to tax, where liability can, if the legislation so provides, be applied retrospectively to the date of an announcement made before the legislation receives Royal Assent.
	Provisions in the Bill also allow for consequential changes for the purposes of contributions, contributory benefits and statutory payments where appropriate. For instance, a national insurance charge might be levied back to 2 December 2004 to align with the start date of anti-avoidance tax measures. In such a case, the provisions of the Bill, and the regulations made under the powers in the Bill, would ensure that those contributions would count for the purposes of contributory benefit and statutory payments.
	The Bill also provides a power to extend the avoidance arrangement disclosure rules to national insurance that currently apply to income tax. Finally, it provides a power to prevent the use of national insurance contribution elections and agreements over shares and securities that have been targeted by backdated national insurance regulations made under the Bill. This will mean that employers cannot pass on to their employees their own national insurance liabilities that they have tried to avoid.
	Significantly, the Government have ensured that the Bill contains important safeguards to ensure that regulations made under it take full account of human rights considerations. This is in addition to the Government's existing duty to make regulations that are compatible with the European convention on human rights. Furthermore, the power to make regulations altering liability is restricted to reflect, so far as is possible, employment remuneration measures in tax legislation—normally Finance Acts—and is intended to be used only to reflect tax anti-avoidance measures. So when such regulations are made, the House will already have had the chance to consider any relevant human rights issues on backdated tax legislation during the passage of the relevant Finance Bill or other legislation.
	The Bill also includes a specific provision to ensure that when, for instance, as part of a package of anti-avoidance measures, there is exceptionally a reduction of national insurance liability for past periods, any existing or future benefit entitlement will not be affected.
	We will publish the draft regulations a minimum of 12 weeks before they are made, so that employers and their representatives will have an opportunity to comment on the technical content of any proposed national insurance changes. Once the Bill has received Royal Assent, any national insurance legislation will have to be laid within 12 months of the corresponding retrospective tax legislation. Furthermore, to ensure that there is adequate parliamentary scrutiny when regulations are made, such regulations will be subject to the affirmative resolution procedure.
	The powers in the Bill will be used, in the first instance, to make regulations to reflect the employment-related securities anti-avoidance provisions included in schedule 2 to the Finance (No. 2) Act 2005, which received Royal Assent in July 2005, but which took effect from 2 December 2004.
	In conclusion, the Bill is important and necessary to ensure fairness. It will not affect the vast majority of employers, who do not seek to avoid their tax and national insurance liabilities through avoidance schemes. However, I have explained how, unfortunately, a small minority continue to try to avoid their obligations, at substantial cost to all other taxpayers. The Bill is therefore an appropriate, proportionate and effective response to national insurance avoidance, and I commend it to the House.

Mark Field: It is self-evident that there are few subjects of debate more likely to empty the Chamber than national insurance contributions.
	In an age in which consecutive Finance Acts create and then abolish new-fangled tax instruments, national insurance contributions have proved remarkably resilient. We are now in the 58th year since their coming into force as part of the welfare state establishment that followed world war two. Back in 1948, all those at work except married women paid the princely weekly sum of 4/11d—that is 24.5p for all those Members of the House younger than me—in a flat-rate compulsory contribution. How times have changed! The only thing that is flat about national insurance today is the spin in which the Government find themselves when trying to raise as much money as possible in their frantic attempt to balance their books. I said in Committee in June during the passage of the Finance Bill in June that,
	"for our part, it is difficult to avoid the conclusion that many of the anti-avoidance proposals are driven by an increasingly desperate Treasury desire to fill its revenue black hole without regard to the damaging effect that it will have on the development of start-up ventures, and, indeed, some bona fide remuneration schemes."—[Official Report, Standing Committee B, 21 June 2005; c. 43.]
	The Finance (No. 2) Act 2005 made a number of amendments to the Income Tax (Earnings and Pensions) Act 2003, with the aim of closing down schemes to avoid income tax using employment-related securities. Those amendments have retrospective effect, as the Paymaster General rightly pointed out, going back to 2 December 2004. It is not currently possible to extend retrospective income tax provisions to national insurance contributions, because liability for NICs can be charged, as the Paymaster General mentioned, only from the date on which NICs regulations are made, except in limited circumstances in which the regulations can be backdated to the beginning of the tax year.
	The Bill's stated purpose is to align national insurance legislation with income tax legislation, which will allow tax liability to be applied back to the date of the announcement. As the Paymaster General pointed out, the Bill also contains provisions to restrict employers' ability to pass on any secondary NICs liability to employees and extends the existing tax disclosure rules to NICs. I shall come to aspects of that in a moment, if I may.
	There is, however, a good reason for existing NICs legislation not allowing regulations to take such retrospective effect. In my view, only in the rarest of circumstances should the Government contemplate either retroactive or retrospective legislation. I fear that the Bill's effect will be to institutionalise retrospection. We shall certainly need to explore that in far greater detail in Committee.
	The substantive clauses will put in place the intention of the Paymaster General's statement of 2 December 2004. Recognising the difficulty of anticipating the ingenuity and inventiveness of the avoidance industry, she gave notice of the Government's intention to deal with any arrangements that emerge that are
	"designed to frustrate our intention that employers and employees should pay the proper amount of tax and NICs on the rewards of employment."
	She continued:
	"Where we become aware of arrangements which attempt to frustrate this intention we will introduce legislation to close them down, where necessary from today."
	As we gathered from the previous exchanges, it is clear that there may be 100 such contrivance schemes. We need to understand whether some of those are in many ways bone fide remuneration schemes, and indeed whether their closure might be detrimental to the very start-up operations that I think all of us in the House agree are the lifeblood of the economy.
	The key issue, however, is whether the importance of protecting tax revenues outweighs the need for certainty in commercial forward planning, because the threat of retrospection came as a great surprise to many tax professionals, as it falls foul of one of the great canons of taxation—that of certainty.
	Arguably, retrospection is also unconstitutional, and if not it should be regarded as acceptable only when couched in unambiguous terms. The Government's admirably comprehensive explanatory notes make much of what they regard as the position under the Human Rights Act 1998. In spite of the characteristically robust protestations of human rights compatibility from the Chancellor of the Exchequer, his is a position of an interested party, for the reasons I have set out. These measures will obviously bring in more money—perhaps as much as £240 million during this year and years to come.
	The Chancellor and the Treasury need that money to keep flowing in, and it strikes me that several experts in this novel but complex field of human rights take a different view on compatibility. No one disputes that it is the Government's duty and responsibility to devise policy, but equally, Parliament must retain effective control over how that policy is implemented by legislation.
	In spite of the Paymaster General's suggestion that this power is relatively limited—the words of comfort about the affirmative procedure were positive—Parliament will undertake only cursory scrutiny, because the Bill is designed to enable Her Majesty's Revenue and Customs to backdate to December 2004 all those NICs to which the Finance (No. 2) Act 2005 changes apply.
	We must consider some of the practical effect—my hon. Friend the Member for West Suffolk (Mr. Spring), the shadow Paymaster General, will mention some such examples later—and remember that NICs come from both the employer and employee. Are the Government seriously suggesting that erstwhile employers of someone who has died after December 2004, or perhaps of a former employee who has been fired in acrimonious circumstances, should have disputed NICs clawed back? This has all the makings of another farce on the lines—although, I accept, not to the same degree—of the tax credits fiasco. How much contingency has the Paymaster General made for writing off sums that can neither be claimed nor easily traced?
	It gets worse, because by the time the Bill has made it through Parliament, no doubt the new year—2006—will be upon us. Unravelling NICs arrangements, which by then would already be over a year old, will also most likely have knock-on implications for the disclosed employer company profits in previous tax years. That may have a crucial impact, especially if the tax avoidance in question is considered widespread within a particular industry sector.

Mark Field: Unfortunately, my constituency contains the City of London, where gold bullion, fine wine and all these contrivance schemes possibly began. It might be different in Wolverhampton. I look forward to visiting the hon. Gentleman's constituency at some point—perhaps in the near future, on a ministerial visit, I hope, when Conservative Members are on the other side of the House.—[Laughter.] That might take a little time.
	On the hon. Gentleman's serious point, we are concerned about retrospection, particularly in relation to national insurance, because of the potential double whammy for many employers. While one can entirely understand the protection given to employees, which we will discuss later or in Committee, one of the great differences between the national insurance contributions regime and the regime under the Finance Act for income tax is that employers run the risk of not only paying their own 12.8 per cent. but their employees' national insurance part. They might be able to go back and sue their tax adviser, but that might not be a practical solution. While we still have grave concerns about retrospection, which were articulated in the Finance Bill Committee, equally, we want to articulate those now and consider the other ways in which the legislation applies.
	Let me continue on the path towards the end of this Second Reading. As I mentioned a moment or two ago, the tax avoidance in question might be widespread in particular industry sectors. What would happen if the company concerned has been sold in the meantime, benefiting from what it will eventually become clear are vastly inflated profits?
	The sheer uncertainty and potential for unfairness outweigh the benefits of this innovative attempt to deal with the avoidance problem that the Treasury understandably seeks to tackle. Given the Paymaster General's broad-brush assertion in her statement of 2 December, how can we be sure that the scope of these retrospective powers will only be used sparingly? Ultimately, the crux of the question is: who judges whether something is to be regarded as unacceptable avoidance?
	Most of the Bill's provisions have retrospective effect. The Government are becoming increasingly open about passing such provisions. Previously, such provisions were only described as retroactive, whereas now the word "retrospective" is openly used in the Bill. While most of the Bill's provisions cannot take effect before 2 December 2004, the effect of sections 5 and 6 is potentially unlimited, as any past agreements and joint elections to transfer secondary liability to national insurance contributions to employees can be disapplied. Under those elections, employees were able to pass the national insurance cost risk to employees without limit as to when the election was entered into.
	The Bill's retrospective effect necessarily causes uncertainty for UK business. Businesses must be able to plan their activities and cost base in a stable framework. That will be difficult if the Treasury has the power to pass new tax provisions with the retrospective effect to which we have referred. The Government justify their approach by pointing out that the new provisions will not affect the
	"overwhelming majority of employers and employees"
	who
	"pay their fair share of tax and NICs".
	Only a small minority, however, have unreasonably
	"sought to use sophisticated and complex tax avoidance schemes to pass more of a burden onto the rest of us".
	Businesses that have attempted to reduce their liability to pay national insurance contributions in accordance with existing legislation are therefore being vilified as antisocial.
	Ideally, we need Her Majesty's Revenue and Customs to set out its thinking on the principles guiding its intended implementation of this policy announcement. During consideration of the Finance (No.2) Act 2005, we called repeatedly for more attention to be paid to the pre-clearance procedure. The spectre of retrospection, and with it uncertainty, makes a pre-clearance process ever more important; otherwise, the Treasury seems to be relying on making any such schemes of arrangement so commercially unattractive that the need for retrospective legislation will be rendered redundant. That is more or less the nub of what the Paymaster General said in our exchanges a few minutes or go.
	That is not a sensible way to run commercial business. We need to encourage dynamism, flair and innovation. Sometimes, such innovation will get it wrong, but closing down these schemes will apply to flair and innovation throughout our commercial world. A heavily regulated economy in every way will not be good news for this country. Flair and innovation are qualities not just of our tax advisers but of many inventors and people throughout industry. That has been one of the great strengths of this country over the past 300 or 400 years, and is one of the reasons why we are such an important trading nation. The worry with this sort of proposal is that it stifles those two important facets.
	We understand that the first use of powers in this area will be to amend the national insurance contributions regulations in parallel with the changes imposed in the employee securities element of the Finance Act 2005. That is unobjectionable, but there is a more fundamental question: now that national insurance involves only a notional contributory element, is it not time that the rules surrounding NICs are changed entirely to work alongside those of income tax?
	The Bill highlights once again the problem of having two taxes that basically cover earnings. Let us face it: the only reason for having NICs and income tax is to uphold the fiction that the basic rate of tax is 22 per cent., when it is really 33 per cent. That is an expensive fiction that costs businesses millions of pounds in administration each and every year. Perhaps things have now got to the point where it is necessary to consider a single stand-alone income tax with a basic rate of 33 per cent. and an employers' portion of 12.8 per cent.

Robert Flello: We are debating what could be described as one side of the Treasury coin, the other side being the Finance Act.
	I am not sure whether this is an ironic coincidence, but in the early 1990s I worked for a major firm of accountants. One of the directors had a particular claim to fame: within two hours of the Budget statement, he had worked out how to get around the proposed anti-avoidance measures. That scenario has continued for at least 15 years.
	I realise that the hon. Member for Cities of London and Westminster (Mr. Field) has a particular constituency angle to take, but why should hard-working lower-paid people in my constituency and other constituencies in north Staffordshire have to pay their tax and national insurance while those who can afford extremely competent tax specialists to advise them get around the legislation? Where is the fairness in that?

David Taylor: Does my hon. Friend agree that, while the Bill is commendable in seeking to reduce avoidance, it is odd that the Government should at the same time be introducing self-invested pension plans that give huge concessions to very rich people, which people in north Staffordshire and north-west Leicestershire can only dream about?

Vincent Cable: As the hon. Member for Cities of London and Westminster (Mr. Field) acknowledged, we are dealing with rather recondite material, and, unfortunately, I drew the short straw among my colleagues in deciding who would speak about it. But in terms of general principles, I broadly endorse what the Government are trying to achieve through the Bill. My colleagues and I voted for higher national insurance contributions to fund the health service, so it follows that we want such revenue to be realised. There are two broad objectives: to ensure revenue integrity, and to reduce the cynicism that inevitably arises when some people pay their taxes but others manage to get round doing so. I understand the Government's broad strategic objectives, which seem perfectly sensible.
	The problem is that in talking generally about tax avoidance, it is very easy to get into a moralistic mindset—a mindset that crept a little into the Paymaster General's speech. Frankly, this area is an ethical quagmire. The Government were helped by a question posed by the Chairman of the Treasury Select Committee a few months ago. He asked what the difference was between legitimate and illegitimate tax avoidance, and the Paymaster General produced a reply that is well worth quoting, because it provides a framework for this discussion. She said:
	"The Government take steps to close down tax avoidance schemes as they become aware of them, particularly where they create economic distortions, provide commercial advantages over compliant taxpayers, redistribute tax revenues in an unfair and arbitrary manner, or represent an abuse that conflicts with or defeats the will of Parliament."—[Official Report, 1 April 2004; Vol. 419, c. 1697W.]
	That seems a good working definition of the distinction between legitimate and illegitimate tax avoidance and, so far as it goes, perfectly sensible.
	However, on reflecting a little more, I concluded that what we are dealing with is not a simple, stark, clear-cut division between legitimacy and illegitimacy. There is a continuity or spectrum of behaviour, and at one extreme there are cynical and manipulative schemes. But at the other end of the spectrum, there are forms of tax avoidance that we all regard as perfectly legitimate and, indeed, that the Government encourage. As I understand it, part of the Financial Secretary's job is to encourage tax avoidance. He introduces environmental taxes that, if successful, stop people doing certain things and therefore reduce Government revenue. That is the will of Parliament and it is sensible, good economics and good for the environment; but it is promoting tax avoidance.
	At the other end of the spectrum are these fancy avoidance schemes, but somewhere in the middle is the kind of behaviour that we all get up to in our private lives as we try to organise our affairs in such a way that we pay as little tax as possible, within the law. A few weeks ago, I was talking to my grown-up children, who live in London and are having horrendous problems dealing with their mortgages. I am considering making a gift from my modest savings in order to help them, and it occurred to me—it certainly occurred to them—that if I manage to organise my affairs in such a way that I do not die in the next seven years, I will help them to avoid paying inheritance tax. That is tax avoidance. Of course, it does not fall within the Paymaster General's definition of illegitimacy, because it does not constitute an organised scheme. But if instead of simply doing a back-of-the-envelope exercise, I did things properly and went to a financial adviser, an accountant or a solicitor, such a course of action would, I think, be illegitimate under the terms of the definition given. Certainly, the definition is hazy, so it is probably useful to approach it not in a moralistic way but in a practical way.
	The practical issue is how the Government can reduce tax avoidance. We are dealing with a very big area: in respect of this source of leakage, the figure of £300 million has been quoted. The Inland Revenue has estimated that it suffers itself from tax avoidance losses of some £2.5 billion to £3 billion in VAT, and probably £10 billion in direct taxation, so the Bill deals with only one corner of a much bigger problem.
	I turn to an interesting and important aspect of the Bill that is at the heart of some of the criticisms offered by the hon. Member for Cities of London and Westminster. The point was summed up by the Chairman of the Treasury Select Committee, when he said:
	"What is new is the declaration that future schemes, not yet devised or which have not yet come to the Inland Revenue's attention, may be stopped as from 2 December 2004. This amounts to a general anti-avoidance rule in this area of taxation of income and rewards".
	That is not necessarily good or bad, but it does break important new ground by embedding in the legislation the principle of retrospective action. As the hon. Member for Cities of London and Westminster suggested, that could create problems in respect of one of the basic principles of taxation: certainty.
	In Committee, we shall doubtless confront a question that will be at the heart of public debate on this issue: whether the principle that the Government are introducing conflicts with fundamental principles in law as we understand them. The Institute of Chartered Accountants, which has looked at this Bill in some detail, questions whether this new principle is compatible with European law. I do not know—I am not a lawyer and certainly not a constitutional lawyer—but I draw the House's attention to a very important legal ruling that dates from April, through which the European Court of Justice is trying to tackle head-on the question of whether a measure such as the one before us is legitimate in terms of European law principles.
	One paragraph of that ruling appears to suggest that what the Government are doing is not compatible with European law principles, but another paragraph appears to constitute the Government's defence. It is worth quoting both, because they will prove central as this legislation proceeds. The first paragraph states:
	"The principles of the protection of legitimate expectation and legal certainty form a part of the Community legal order. They must accordingly be observed . . . by the Member States".
	If it is correct that this legislation diminishes legal certainty, it may well violate European justice as it applies to tax law. The following paragraph, however, is more qualified. It states:
	"Although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication"—
	in other words, retrospectively—
	"it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned arc duly respected".
	A key issue will be whether the legitimate expectations of those introducing such schemes have been respected. It is a fairly narrow point and it is not clear to me who is right and who is wrong, but as the Bill proceeds we will need proper clarification of whether its legal basis has been thought through in terms of those wider principles.
	There are two other practical problems that the ICA and others have thought through, and on which the hon. Member for Cities of London and Westminster touched. The first concerns a legislative principle and the way in which this House proceeds. As I understand it, one consequence of the manner of the Bill's introduction is that secondary legislation will be introduced at the same time as primary legislation, so there will not be the traditional opportunity for a 12-month period of consultation of those affected by such legislation. I am not sure that I fully understand the problem here, but it has been highlighted by the practitioners and it would be useful if the Government commented on it.
	The other practical problem, which the hon. Member for Cities of London and Westminster also mentioned, is the question of what happens to those employers who, although they are clearly party to such schemes, may not have prompted them. What happens if such an employer finds that, because the legislation is invoked retrospectively, in practice they cannot claw back concessions already made to the employee? Such an employer is the piggy in the middle who has been stuck with the liability. What is their position?
	In conclusion, I would like to summarise my argument by making two wider points. First, although it is right and I fully support the idea of pursuing anti-avoidance as far as is possible and practical within the law, it is not always clear that the Treasury's emphasis should be on anti-avoidance. It should reflect further on the problems created by over-complexity. One of the leading authorities on British tax law—Edward Troup, who happens to be one of my constituents and who frequently appears before the Treasury Committee—summarised the problem elegantly:
	"The aim of Government should be to . . . do its best to ensure that the 'return' from tax planning is as low as possible . . . a simpler tax system with fewer reliefs, exemptions and discontinuities would, in the long term, frustrate most of the tax evaders' ploys . . . Management has to decide between whether £10,000 of tax planners' fees is likely to give a better post-tax return than the amount spent on, say, advertising. This judgement is not immoral, it is inevitable".
	That is why I and my colleagues, as well as the Conservatives, are looking further into the whole principle of tax simplification. Our commission got going a little quicker than theirs, but whether it will end up recommending some version of a flat tax, I do not know. I have an open mind on that matter. The underlying principle of pursuing simplicity is clearly very desirable.
	Finally, it is not a question of simplification alone. We also need to focus more on the question of tax administration and the competence of the tax administration authorities. I do not have many people in Twickenham running around with gold bullion, but I have do have many people who work in the computer industry. They often send me e-mails from their occasional employer, the Inland Revenue, with positively hair-raising tales of computer breakdowns involving something called ERIC and management failures in the Revenue that are costing billions as a result of weak, unsatisfactory and badly managed revenue-collection systems. I do not know the truth in that matter: I am not part of it, but I see the fragments shown to me by people who are witness to it.
	I believe that more revenue could be realised by the Treasury through better tax administration and tax simplification than through the pursuit of anti-avoidance measures. As far as the Bill goes, the principles behind what the Government are seeking to achieve seem sensible, subject to the various specific legal and practical steps that we shall pursue in Committee.

Iain Wright: I begin by declaring an interest: I am a chartered accountant and before my time in the House I was employed by one of the big four accountancy firms. I worked in the noble art of corporate governance and risk management, rather than the possibly shady dealings of tax avoidance.
	I welcome the Bill enormously and sincerely hope that Conservative Members will not divide the House on it. It continues the theme introduced by previous Governments of clamping down on tax-avoidance schemes, and it is right and proper that Governments of all political persuasions work to ensure that all businesses and employees pay the correct amount of tax and national insurance contributions at the appropriate time.
	As my right hon. Friend the Paymaster General said in her opening remarks, the Bill advances the work that was started by the Conservative Administration. The right hon. Member for Hitchin and Harpenden (Mr. Lilley), who is not in his place, looked into the problem when he was Secretary of State for Social Security in the John Major Administration. As my hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello) mentioned, the right hon. Gentleman announced in 1995 measures designed to stop a "national insurance dodge" of paying employees in tradable assets. In the following year, he announced further powers to stop "the latest dodge" of avoiding national insurance when employees were paid in their company's own shares. The Labour Government have continued—and, indeed, accelerated—the trend, with measures such as bringing under PAYE assets readily convertible into cash in 1998, and dealing with employment-related shares in 2003.
	I therefore believe that there is a political consensus on this matter, and rightly so. However, over the past 20 years the fight against avoidance has been undertaken in an environment in which the schemes, or scams, have become ever more ingenious and imaginative. The Government have been sharp in closing loopholes, but rather like a fairground game where little squirrel heads pop up at random and have to be hit with a hammer, the Government spot one scam and then another pops up somewhere else.
	It is extremely lucrative for tax advisers to come up with ever-more imaginative schemes to avoid tax and national insurance, largely because the benefits—the tax and NICs saved through avoidance—far outweigh the potential risks of fines and possibly having to pay interest on the tax. Some of the inventive scams to avoid NICs are far-fetched to the point of being comical. My hon. Friend the Member for Stoke-on-Trent, South mentioned oriental carpets, and when I was researching for my speech, I discovered a City worker who had been paid a bonus of oriental carpets worth about £100,000. The carpets were held in storage and then seemed to become magical, as they never materialised and were never seen in the home.
	Platinum sponges are another example. I have not done as much research on them as my hon. Friend the Member for Stoke-on-Trent, South, so I do not have a clue what they are. I do know three things, though: platinum sponges are not platinum jewellery; they are not sponges for washing; and, most importantly, they are in reality a scam to avoid paying rightful levels of national insurance contributions.
	It seems to me that an enormous amount of energy and resources from the Government are devoted towards ensuring that a small majority of highly paid earners pay the proper amount of tax and national insurance like the rest of us. Those resources could be redeployed towards services that are of real benefit to the country, such as improving public services and tackling family poverty. That is why I welcome the moves that the Labour Government have made—further than any other Administration, in my view—in combating tax-avoidance schemes. The need for promoters of schemes to notify Her Majesty's Revenue and Customs of them is extremely welcome and long overdue. Rather than playing the squirrel game, the squirrels now have to tell the Government where and when their heads will be appearing. That may be less fun, but it is certainly a lot fairer.
	Yet this Bill goes one step further. I think that its best feature is the power to close down and backdate avoidance arrangements, where necessary, to 2 December 2004. I strongly believe that advisers, companies and workers were given adequate notice of the Government's intentions in the 2004 pre-Budget report. Reviews in the press this week seem to suggest that the Government's objective will be achieved. Mike Warburton, senior tax partner at Grant Thornton, was quoted this week in Accountancy Age as saying that the Bill
	"makes it very debatable whether it's worth anybody's while doing things that are seen as aggressive by HMRC".
	Quite right.
	I want to end on the central theme of why I welcome the Bill most of all. Much as I love technical accountancy jargon, the Bill is not purely about rectifying technical inconsistencies and loopholes in the tax regime. First and foremost, it is all about fairness—fairness for all those who pay income tax and national insurance contributions. Why should a privileged few—mostly in the City of London—be allowed to cheat the vast majority of hard-working taxpayers and users of public services by not paying the rightful amount? It borders on the immoral. Why should hard-working families in Hartlepool, who pay tax and national insurance contributions through the PAYE system and have no control over the manner in which they are paid, subsidise the avoidance efforts of a wealthy elite?
	I hold weekly surgeries and I have to confess that no constituent has ever expressed concern that we are restricting the use of platinum sponges as a means of rewarding employment. That is what this Bill is about—fairness for all taxpayers, not favouritism for a few.
	This is not a Bill that takes the food out of the mouths of hard-working families who are struggling to make ends meet. I have no doubt that the people whom the Bill will affect most are hard working, but they are, after all, paid handsomely for what they do and their remuneration is getting better. Only this week in the Financial Times, in an article entitled "Bank staff do best as City pay increases", I was informed that, before the payment of winter bonuses, directors, senior analysts, corporate financiers and fund managers have seen their basic pay rise by 9.2 per cent. since this time last year, to an average basic salary of £76,950—and bonuses are expected to be larger than last year, too, after a buoyant summer with lots of mergers and acquisitions. The media also reported this week that as many as 3,000 bankers and brokers will earn about £1 million each in bonuses alone after the best City performance for years.
	Those figures are hardly typical of a financial sector on the bones of its backside. I do not begrudge those bonuses at all, although I should like some of the City pension fund managers who might receive them to have a word with my constituents in the Expomet and Roxby companies who face missing out on the final salary schemes that they have paid into for years. It is only right that the very small number of taxpayers involved should pay the correct amount of tax and national insurance.
	I hope that I have made it clear that I strongly believe that the Bill is all about fairness. I fully support its objective, and urge the House to give it a Second Reading.

Philip Dunne: I share the concerns about the Bill expressed by my hon. Friends the Members for Croydon, Central (Mr. Pelling) and for Cities of London and Westminster (Mr. Field), especially about the Bill's retrospective nature.
	I understand the desire expressed by the Chancellor, the Paymaster General and other Opposition Members to minimise the scope for remuneration contrivances to escape the tax and national insurance net. Indeed, I have considerable sympathy with the objective of dealing with the imaginative but essentially contrived schemes about which we have heard. I confess that the use of platinum sponge is a new one on me, too.
	However, my concerns go beyond the specific provisions of the Bill. This country has rightly earned great respect in the international business community for the probity of our laws and customs. Indeed, even the HMRC has commanded respect—if little love—for the certainty, if not always the clarity, of its decisions. As we have heard, companies, individuals and their advisers have long enjoyed the ability to base their commercial decisions on a principle of certainty in respect of the tax laws at the time those decisions were made. The law has always been open to interpretation, which has enabled the entire tax advice industry to flourish, but commercial decisions could be made according to the law prevailing at the time.
	Unfortunately, the Bill reinforces a very unwelcome principle that has been introduced into our tax law—the ability to change the rules as the Government choose. The Institute of Chartered Accountants has expressed concern about that, as the hon. Member for Twickenham (Dr. Cable) noted. In its briefing paper, the ICA said:
	"Registration legislation is not a satisfactory solution: not only does it make for uncertainty for employers but there is a real probability that it is ultra vires European Law".
	My views on Europe may not be well known in this House, but they are to my constituents and it is extremely rare for me to find comfort in pronouncements from Europe. However, as we have heard from the Liberal Democrat spokesman, there is some case law that needs to be explored in Committee, not least because the Institute of Chartered Accountants states:
	"We do not think that anyone reading the Paymaster General's 2 December 2004 statement could have expected the content of this Bill."
	Labour Members have focused much of their enthusiasm for the Bill on the impact it may have on fat cats in the City, and reference has been made to the large sums that many people earn there. The issue is not confined to the City of London, however. In my constituency, there is an individual who sells millions of pounds-worth of perfume to the far east, on which he earns substantial commission. That gentleman could take his business anywhere in the world, and I should like to focus on that point.
	The Prime Minister appears to have woken up only relatively recently to the challenges of globalisation, but the economy has been at the forefront of global trade for centuries. Since 1979, as economic liberalisation has been successively introduced, mostly under the previous Conservative Government, increased inward investment to the UK has provided a major boost to economic growth and productivity. The scale of that investment is well illustrated. The Paymaster General has unfortunately left the Chamber so we cannot confirm whether her regular morning reading includes The Daily Telegraph, but I shall quote a brief extract to illustrate my point:
	"Overseas investors own more than a third of the 100 blue chip companies listed on the London Stock Exchange, 10 of those aren't even British, 250 of the 1,066 top flight directors are foreigners and some of our most important industries—such as energy and banking—are largely controlled by European and US companies."
	We can thus see that a significant proportion of senior executives in leading companies across industrial sectors, as well as many of those sustaining the City of London's global position in financial services, are foreign nationals, often working for foreign firms. I speak with some authority as a few years ago, before I came to this place, I worked for a foreign-owned bank.
	The relevance of those points to the debate is twofold. First, from an individual point of view, a large number of highly skilled and highly rewarded individuals currently choose to work in the UK in roles that they could also undertake overseas. It is not beyond their wit to try to weight their remuneration away from the higher tax jurisdiction. With modern technology and working practices, especially in the service sector, there is a real risk that by introducing retrospection to our tax system for individuals, doubt will be cast over our personal taxation system, which will encourage income to be earned overseas and, perversely, may reduce rather than increase the return to HMRC.
	Secondly, from a corporate perspective, the more worrying implication is the doubt that retrospective tax legislation introduces in the fairness of the tax system operating in this country. In a global market, companies can choose where to operate. Businesses are highly flexible and many can move their operations to jurisdictions where they perceive commercial advantage. We are increasingly used to the advantages of China and India, about which we hear so much from the Chancellor, in relation to labour-intensive activities, but the capital-intensive sector, where many of these proposals are directed, is highly mobile. A good example is reinsurance, a completely mobile activity, much of which has moved to Bermuda over the last 10 years. Such sectors often remunerate their employees very well.
	My concern is that when HMRC is both judge and jury and tax legislation is introduced with retrospective effect, it could seriously erode confidence in the fairness of our tax system. The Government need to take great care. I am not sure whether the Economic Secretary is aware that the last time retrospective tax measures were introduced was under the last Labour Chancellor, Chancellor Healey, and look what happened to him. The serious point is that if companies lose confidence in the tax system, those that are not in this country will think carefully before they choose whether to come to the UK or locate elsewhere. Those already in this country, especially if the breach in the dyke were to be widened with further retrospective proposals, might eventually consider moving away. That would damage the economy, damage confidence in our tax system and damage the Government's tax revenues.

Stephen Hammond: I have washed this morning, but not with platinum.
	The Paymaster General left us in no doubt that the Bill was designed to stop evasion of national insurance contributions by introducing powers that enable the Treasury to make regulations to prohibit the use of avoidance schemes with retrospective effect from 2 December 2004. When the Economic Secretary winds up the debate, I am sure that he will make the valid point that such an intention was set out by the Paymaster General on 2 December 2004 and that the Bill merely brings the national insurance regime into line with what the Government enacted in the Finance Bill this year, so I understand the right hon. Lady's comment that she regards the legislation as non-controversial.
	There are four aspects of the measure that we need to consider, however. Much has already been made of the retrospective nature of the Bill, but we should also consider possible use of the powers beyond that for which they were intended; the whole issue of avoidance, evasion and tax-planning; the introduction of an anti-avoidance rule, to which the Liberal Democrat spokesman referred; and the potential cost to business. I want briefly to examine those issues.
	I had the privilege to speak on Second Reading of the Finance Bill and served on its Committee, where luckily the hon. Member for Wolverhampton, South-West (Rob Marris) helped us through the explanatory notes. I congratulate the Paymaster General and the Economic Secretary on this Bill, which is to be applauded for its brevity, clarity and its helpful explanatory notes—quite a contrast to the Finance Bill.
	The hon. Member for Hartlepool seemed to question the position of Conservative Members. My hon. Friend the Member for Cities of London and Westminster (Mr. Field) has made it clear, not only today but in previous dates in the House, that we do not support anyone who does not want to comply with their tax obligations. That is our position and it extends to national insurance contributions as well.
	The Bill, as I understand it, contains three measures: the power to make regulations to create a retrospective liability for national insurance contributions; to allow the disclosure of national insurance contribution avoidance schemes and arrangements; and the voiding of those arrangements and elections. Much has been made of retrospection by my hon. Friends. Any legislation that introduces retrospective powers must be regarded with caution. Understandably, taxpayers are instinctively nervous, for with the prospect of retrospection they also face the prospect of uncertainty and unfairness. Furthermore, and more important, it creates uncertainty for business and especially for business investment. Certainty is a key component in the environment for business investment and one criterion on which business undoubtedly bases its decisions is the existing tax and national insurance burden it is likely to face, or the likely burden when a decision is made. If the Government constantly introduce legislation with retrospective effect, it will undoubtedly create uncertainty for business and will affect business investment. An inevitable consequence of the Bill will be some undermining of business investment.
	The power to create regulations for retrospective liability is enacted in clauses 1 to 4 and although those clauses confer that power on the Treasury, the Bill also supposedly constrains the power to the extent that such regulations can be made only to reflect in national insurance regulations previous retrospective changes to the income tax Acts, only where the Treasury considers it expedient for national insurance contribution regulations to have that retrospective effect, and only back to 2 December. However, in all those cases the Treasury is acting as its own constraint, so we need reassurance from the Treasury about the scope of the powers, the exact nature of the constraints and the way in which they will be used. The explanatory notes state that the powers will be used only in anti-avoidance measures. That is not helpful, reassuring or terribly explanatory. The Government will want to reassure the House that those powers will be proportionate to the mischief that they aim to tackle, and that they are sufficient only to catch tax avoidance schemes. They should not be so wide that they are disproportionate, and taxpayers' legitimate expectations to be taxed in accordance with the law when the transaction is carried out should not be abused.
	Clauses 1 to 4 will be used to bring national insurance contributions regulations in line with regulations imposed by schedule 2 of the Finance Act 2005, especially in relation to employee securities for taxation purposes. If I understand clause 1 correctly, the powers will be used to ensure that, where possible, NIC and income tax PAYE legislation are changed in parallel. If that is the Treasury's intention, it would be useful to know that the process will be managed. It is desirable that NIC and income tax disclosure rules be made in parallel. Clauses 1 to 7 suggest that that is the intention behind the Bill, but I should be grateful if the Economic Secretary answered some practical concerns. If the rules are included in regulations as secondary powers, as the Bill suggests, when will the draft regulations be available? Will the Economic Secretary confirm that they will be subject to proper scrutiny and that the disclosure rules for national insurance and income tax will be similar?
	The Government's attitude to tax planning, as opposed to tax avoidance, has been subject to a great deal of criticism, and the issue was raised several times in the Finance Bill Committee. It bears repetition that planning tax liabilities is entirely lawful, but in the Bill the Government appear to maintain their stance that any tax planning is avoidance. Taxpayers have the right to organise their affairs in accordance with the law—that is tax planning. If the Government deem that law inappropriate, that is not the taxpayer's fault. Tax planning should not be confused with tax avoidance.
	The Government are pursuing something that began in the Paymaster General's statement on 2 December 2004 and, indeed, the Finance Act 2005. The Bill is widely drawn and tax authorities are given wide discretionary powers, so the Government are effectively introducing the general anti-avoidance rule that they first sought to introduce in 1997. In 1997, the Chancellor asked the Inland Revenue to investigate the impact of a general anti-avoidance rule, but, following objections, the Government pursued the disclosure regime route. However, if disclosure legislation is too widely drawn its powers extend beyond those of anti-avoidance or appropriate disclosure regimes, as wide-ranging and arbitrary powers are introduced for tax authorities that go well beyond the mischief that they are intended to address.
	In a statement on the pre-Budget report in December 2004, the Paymaster General stated:
	"The disclosure rules in the Finance Act 2004 have revealed that avoidance is still rife."
	She went on to say that
	"experience has taught us that we are not always able to anticipate the ingenuity and inventiveness of the avoidance industry. Nor should we have to."
	She concluded that
	"the time has come to close down this activity permanently."
	The Select Committee on Treasury has no doubt that the Government moved from a disclosure regime to a regime of general anti-avoidance rules. Its Chairman, the right hon. Member for West Dunbartonshire (Mr. McFall), stated:
	"What is new is the declaration that future schemes, not yet devised or which have not yet come to the Inland Revenue's attention, may be stopped as from 2 December 2004. This amounts to a general anti-avoidance rule".
	The Government must address certain issues if they wish to move from a disclosure regime to a regime for the taxation of rewards and national insurance. If a general anti-avoidance regime is deemed necessary because avoidance is supposedly rife the Government may fall into the trap of creating more tax legislation of increasing complexity and thus an increasing number of opportunities for the clever gentlemen described by the hon. Members for Stoke-on-Trent, South (Mr. Flello) and for Hartlepool to devise tax avoidance and evasion schemes. It is therefore disappointing that the legislation has been introduced, because it highlights the need for a simpler tax system with fewer reliefs, exemptions and discontinuities to thwart most tax avoidance

Stephen Hammond: I beg to differ—it is the hon. Gentleman who has put the cart before the horse. There are more members of the tax planning community because the Government are creating more complex legislation, in which tax planners seek to pick holes.
	Tax practitioners acknowledge that measures in the Bill will act as a deterrent impact, but Joy Svasti-Salee of KPMG says that
	"they create uncertainty which is not good".
	It is not clear which schemes will be allowed and which prohibited when they are left unspecified by a general catch-all. By contrast, specific laws would aim to define abuse and avoidance. Discretion has been granted to the authorities over NICs and income tax but, as my hon. Friend the Member for Cities of London and Westminster (Mr. Field) said, that should go hand in hand with binding tax and NIC clearance granted by the HMRC when its opinion or advice is sought about a tax scheme by a taxpayer prior to making certain decisions about the structure of their financial affairs.
	HMRC has resisted that proposal, and undoubtedly the Paymaster-General will repeat that it is not in the business of giving free tax advice. That argument falls, because she has changed the rules, and if a specific proposal is taken to HMRC on a matter of tax or NIC policy in which the authority has acknowledged and increased discretion, it is wholly appropriate that it should have a duty to give a ruling about how it will exercise those powers prior to the implementation of a scheme.

Richard Spring: Nobody could dispute the important principle that illegitimate tax avoidance must be dealt with, but as we heard in our debate today, there are issues concerning certainty, which means that we must consider legislation such as the Bill with great care and sensitivity.
	I have two general points to make. First, simplifying the tax system as a whole would, over time, reduce the desire to avoid tax by complicated schemes, NIC schemes or other forms of avoidance. However, as emerged clearly today, retrospection should be used very sparingly indeed. I fear we risk moving away from that principle as the Government desperately try to fill their black hole. Secondly, the increasing burden on small businesses from filling in extra forms and providing even more information to the Treasury as a result of the Bill must be considered in the context of the ever-increasing weight of bureaucracy.
	I thank all those who spoke in the debate. I was particularly pleased that we had a contribution from the hon. Member for Stoke-on-Trent, South (Mr. Flello), because I see that before he came to the House he was a tax consultant and worked for the Inland Revenue, so I am sure he will make worthwhile contributions to discussions on these matters in future. He spoke about gold, mink coats, coffee beans and other esoteric items. I worked in the financial services industry until 1992, but none of these was on offer, as I recall, though apparently that did happen.
	The hon. Member for Twickenham (Dr. Cable) was right to say that it is difficult to brand something as wholly legitimate or wholly illegitimate. There is indeed a spectrum, and in the present context situations are not always clear cut. I agree that we are discussing a practical issue. He spoke, for example, about the clawing back of concessions already made to employees, again taking up the powerful point about the over-complexity of regulations and the tax system. I hope Ministers will recognise that.
	The hon. Member for Hartlepool (Mr. Wright) declared how virtuous he had been in his previous life. I say to him as gently as possible that the words "virtue" and "Hartlepool" are not automatically associated in people's minds in the House. I feel sure that he will overcome that in due course. He spoke about NIC scams, the issue of retrospection, and very high salaries in the private sector. However, high salaries are not confined to the private sector. He will know what goes on in local government and the sort of salaries paid to people in primary care trusts and the NHS.
	My hon. Friend the Member for Croydon, Central (Mr. Pelling) rightly pointed out that complexity encourages avoidance. That is the theme that has run through the debate. Simplifying the system would increase revenue and promote certainty. My hon. Friend spoke of wealth creation and the important role of wealth creators in our society. My hon. Friend the Member for Ludlow (Mr. Dunne) spoke about uncertainty and the fact that the Bill reinforces the principle of retrospection. He was right to say that there was always the risk that people coming to work in the United Kingdom from abroad had arrangements for a proportion of their remuneration to be made elsewhere. He noted that we were in a globally competitive marketplace for good people. The City of London is hugely important to our financial and economic well-being, and he was right to highlight the re-insurance market.
	In a thoughtful contribution my hon. Friend the Member for Wimbledon (Stephen Hammond) emphasised the need for great caution with regard to retrospection. He spoke of the importance of certainty for business investment purposes, the threat of investment being undermined by the lack of certainty, the importance of defining constraints, and the movement towards a more general anti-avoidance culture, with all that flows from it.
	Many experts have commented that we need more assurances on the scope of the proposed powers and the way in which they will be used. It is not sufficient that the explanatory notes state that the retrospective powers will be used only in anti-avoidance situations—a point made tellingly by my hon. Friend the Member for Cities of London and Westminster (Mr. Field). Who will judge what constitutes unacceptable avoidance? We need to treat retrospection with great care.
	Many firms will be setting out their tax plans and accounts for the forthcoming year and will already have done so for the previous year. In its 2004 pre-Budget report, the Treasury Committee stated in respect of retrospection:
	"The Inland Revenue should, without jeopardising their position, publish a paper setting out their thinking on the principles which will guide the way they implement this announcement".
	The explanatory notes, though welcome and clear, are not a full and satisfactory substitute for such a paper. At least businesses will then have additional certainty about how the law will apply to them.
	Clause 1 seems to indicate that the powers will be used in such a way as to ensure that as far as possible NICs, income tax and PAYE are changed in parallel. Although we welcome the assurance from the Paymaster General that businesses would be given time, a coherent approach is necessary and we would welcome the Government's assurance that that is their intention and details of how it is to be orchestrated.
	After reading the explanatory notes, outside observers were struck by the fact that the overview of statutory payments in annexe B is an illustration of how much work has to be done by employers on behalf of the Government in handing out the benefits. In the regulatory impact assessment, the Government attempted to assess the Bill's potential impact and came to the conclusion that the combined impact of the measures included in the Bill
	"will not impose significant additional burdens or costs on employers unless they engage in contrived schemes to avoid income tax and NICs on remuneration paid to their employees."
	They further state that the NIC avoidance measures are not aimed at businesses of any particular size and will not affect small businesses disproportionately. However, it should be remembered that small businesses may find it more difficult to attract quality personnel, and therefore need to be able to offer tax-efficient employee incentive schemes.
	As the Government have already announced, the powers in the Bill will first be used to tackle NIC avoidance through employment-related securities. It has been suggested that that will disproportionately affect the businesses that the Government originally intended to promote by introducing tax-efficient employee incentive schemes such as the enterprise management incentive scheme. That requires clarification. I do not expect the Minister to comment specifically on the scheme this afternoon, but it would be useful if he could write to me explaining how such a scheme is likely to operate in future.
	The enterprise management incentive scheme was introduced in the Finance Act 2000 and it neatly demonstrates the conflicting and contradictory aims that may be the result of complicating the tax system and over-regulating the business community. The scheme was designed to help small, growing companies to recruit and retain high-calibre individuals who would otherwise be attracted by more established businesses offering better salaries. A qualifying company is allowed to grant share options worth up to £3 million to any number of its employees. No tax or NICs are payable on the grant of the share options, provided that they are capable of being exercised—and are exercised—within 10 years. If, on the exercise of the share option, the price at which the employee can exercise the option is at least equal to the market value of the shares when the option was granted, no tax or NICs are charged.
	While such schemes are welcome for trying to help smaller, entrepreneurial companies to attract and recruit high-quality individuals, the Bill might disproportionately affect the very companies that the Government are trying to help to implement similar schemes, for similar purposes, by mitigating the amount of NICs that they pay. I am thus citing a practical example of what we are talking about, so I would like the Minister to shine some light on how the system is likely to work in practice.
	We have seen huge growth in the size of the Red Book over the past few years, and our tax system is now very complex. A frenetic game of cat and mouse has been played on tax avoidance, primarily regarding NICs, between the Treasury and the Revenue, and the tax advisory sector, which devotes ever-increasing amounts of time and effort to exploiting legal loopholes in legislation to minimise NIC liability or other forms of taxation. The whole tax advisory business has blossomed under this obsessively bureaucratic Government.
	The need for Government revenue and the complexity of the tax system provoke and increase attempts at avoidance because they cause too many loopholes to be exposed. If the Government are intent on continuing to deal with the symptoms rather than the cause, the patient will continue to get sicker. Meanwhile, an annual dose of alternative medicine in each Finance Act will simply not give us a long-term cure.
	It has been estimated that 21,000 small businesses, and perhaps a further 90,000 self-employed persons, will incur learning and familiarisation costs as a result of the Bill. Ministers must realise that regulations do not exist in a vacuum. Once they leave Whitehall they do not simply float away. Regulations have had a significant and direct effect on businesses that have to devote time and resources away from increasing production so that they can focus on compliance with Government regulations.
	The British Chambers of Commerce says that the total cost of regulation to British business is now running at many billions of pounds—it has increased dramatically. The Government have introduced over 27,000 regulations since coming to office, which is an average of nearly 4,000 each year, or 15 new regulations every working day. They have hugely increased the burden of regulation since they came to office.

Ivan Lewis: This has undoubtedly been an interesting debate about an important Bill that is absolutely central to the Government's aim of deterring tax and NICs avoidance. Before I address some of the specific points raised during the debate in a little detail, I shall reiterate the Bill's purpose.
	The Bill demonstrates our continuing commitment to take action against avoidance. It is key to achieving the Treasury and Government's objectives of fairness and opportunity by ensuring that all pay the correct amount of tax and national insurance. It is an essential element in building a serious and credible deterrent against future avoidance activity, and is needed to secure a total tax and national insurance yield of £200 million in 2004–05 and £500 million a year thereafter. As the income tax disclosure provisions have demonstrated, it is not possible to anticipate the range and complexity of such extremely contrived arrangements. The Government intend to close such activity down permanently. The Bill will ensure that the Government can deal with any arrangements that emerge in future that are designed to frustrate their intention that employers and employees should pay the proper amount of national insurance on the rewards of employment.
	I now turn to specific points raised during the debate. The hon. Member for Cities of London and Westminster (Mr. Field) made a typically reasoned and fair speech. Indeed, it was based in the real world to a large extent, but when he talked about sitting on this side of the House and visiting the constituency of my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) one day, it began to reach the realms of fantasy.
	The hon. Gentleman seemed to advocate the virtues of a flat tax. I tell him that we will make it absolutely clear to the British people at every opportunity that if the Conservative party were ever to govern this country, it would impose on the people a flat tax that would be both unfair and impractical. The people of this country will make judgments about the nature of such policies when the time comes.
	The hon. Gentleman used the phrase "desperate Treasury" and that sentiment was echoed by several Conservative Members. That desperate Treasury has delivered to this country low inflation, low interest rates, 2 million new jobs and the lowest unemployment in living memory. Let us be clear what the business community asks of any Government—that they deliver stability. If a Government deliver economic stability, businesses will grow and prosper. No Government since the war in this country have delivered such macro-economic stability as ours, so let us stop the nonsense of labelling the Treasury as desperate, or of saying that measures such as the Bill somehow undermine business competitiveness.
	The hon. Gentleman talked about bona fide avoidance schemes, although I am sure that he did not mean to do so. There is no such thing as a bona fide avoidance scheme, although his comment colours several contributions made by Conservative Members. Avoiding taxation is not a demonstration of flair and innovation. If we gave people the impression that we will incentivise, reward and encourage flair and innovation in the context of avoiding tax responsibilities, what kind of message would we be sending to the private sector in this country?

Philip Dunne: We have just heard for the second time from Ministers a list of the previous mischievous attempts to get around the tax and national insurance regime. However, that fails to deal with the issue of retrospection, which my hon. Friends and I were arguing about. We are talking about retrospective action from the point when the Bill becomes an Act, compared with the point when an announcement is made in the House. That is the period where there is difficulty.

Ivan Lewis: We politicians have just watched from a distance the political crisis in Germany, much of which is connected to the fundamental weaknesses and difficulties in the German economy. The German people and political classes would be delighted to have the economic framework that the Government have created in this country since 1997. Arguably, Germany has experienced some of those difficulties, yes, because of unification—we must be fair about that, and a lot of people are unfair when they forget to mention the unification of Germany—but also because it has been slow in some ways to face up to the realities of global economic change, and our economic policies have been based entirely on facing up to them.
	The hon. Member for Wimbledon (Stephen Hammond) expressed sadness that my hon. Friend the Member for Wolverhampton, South-West had not spoken in the debate. That sadness is shared by those of us on the Front Bench, and we look forward to his taking a similar role in Committee. The hon. Gentleman wants an assurance that our approach to the tackling of avoidance will be proportionate—I can give him that assurance—but he talked about the cost implications for business. The message is simple: if business does not avoid tax, these anti-avoidance schemes have no cost implications.
	The hon. Member for West Suffolk (Mr. Spring) asked in his contribution whose judgment would be in play in these issues. It will be the House's judgment. Direct taxation is dealt with in the Finance Bill. National insurance issues are dealt with by affirmative resolution in both Houses. So the Government are certainly happy to take responsibility for those questions of judgment. He also asked me—I am a bit puzzled by this—to write to him about a specific scheme that he referred to so that I can tell him what he is talking about. I should be delighted to tell him what he was talking about, and I will write to him about that specific scheme, although I do not recall its name.
	This has been a good-quality debate on the whole and a good-natured debate. There is consensus on both sides of the House about our responsibility and duty to have a fair taxation system and to tackle tax avoidance effectively. Clearly, we must debate a number of points in Committee, and I look forward to those debates. I commend the Bill to the House.
	Question put and agreed to.
	Bill accordingly read a Second time.

Tim Farron: I am grateful to my hon. Friend for raising that important point, to which I shall turn in a moment.
	It is important to recognise that there are competing liberties here—the right to have a first home and the right to have a second home. When it comes to a competition between those liberties, and at times it does, I am certain about which side of the fence I am on. It is important that the primary right is to a decent and affordable first home for people and their families. Second-home ownership can bring some benefits to an area but a balance needs to be struck.
	How do we achieve that? The Government could put a cap on the second-home market in those parts of Cumbria where it is agreed that the proportion of second-home ownership is excessive. They could do that by introducing a new planning law that would place turning a first home into a second home in a formal category of change of use. In parishes where second-home ownership exceeded an agreed limit, the planning authority's default position would be to refuse any application for a change of use.

Tim Farron: Yes. I am grateful to my hon. Friend for making that point. Clearly, the Government could build such a provision into the mechanism. That would be helpful. It is important to examine the possibilities and be pragmatic. It is not beyond the Government's wit to draft enforceable legislation and guidance on the matter.
	Another way in which to affect the housing market positively would be to build on the Government's encouraging recent work of granting local authorities permission to charge second-home owners up to 90 per cent. of the full amount of council tax. The position is much improved. The previous Conservative Administration—representatives of which are scarce—deliberately granted a 50 per cent. council tax subsidy for second-home owners when they introduced the council tax in 1991. It is a great shame that no Conservative Members are here to intervene and put me right should I be wrong. It was a reprehensible act, which redistributed wealth from the hard-working many to the privileged few.
	I urge the Government to abolish the remaining 10 per cent. relief to second-home owners and to examine the possibility of introducing permission further to increase council tax for second-home owners in areas where there is deemed to be an excess of second-home ownership. Such a measure would reduce demand for second homes, although, realistically, it may not make a vast difference. More important, it would provide local authorities with the wherewithal to fund new affordable housing schemes.
	The communities of south lakeland are well aware of the Government's plan, which has already been mentioned, to introduce new pension rules from April 2006, to give tax relief of up to £215,000 to individuals who invest in a second or third property and place it in their personal pension. They also know that the change will have disastrous consequences for our area, providing another incentive for purchasing second homes and further heating an already overheated market, thus leaving local families who are searching for a home in an even more desperate position.
	With one in six homes already beyond the reach of local families, how much worse will the position be for Cumbria's towns and villages when the new pension rules are introduced? How many more local young people and families will be forced to move away from the area that they call their home as a result of the proposal? How many beautiful lakeland villages, which so many hon. Members have visited on their holidays, will become moribund ghost towns, bereft of a living, working community?
	The Lake District and the Yorkshire Dales national parks are in my constituency. For those national parks to remain valuable centres of peace and recreation for the nation, the communities in them must not be allowed to die, replaced by weekend havens for the well-to-do. The national parks were set up as accessible assets for the nation—for the people of this country. To contribute towards the parks' becoming available only to a minority flies in the face of the national park ideal, with which the Labour party has often closely aligned itself.
	I am sure that the Government did not intend to damage rural communities through their pension plans. However, the proposal's unforeseen consequences will be appalling. I ask the Minister to confirm in his response that the Government will abandon the proposed change in the pension rules.

Phil Woolas: I should like to start not only with the traditional congratulations to the hon. Member for Westmorland and Lonsdale (Tim Farron) on securing this debate, but with very genuine congratulations. He has raised this issue in his maiden speech, in two letters to the Office of the Deputy Prime Minister, in his early-day motion, in a press release this afternoon and in this Adjournment debate, and I congratulate him on his campaign. I agree with much of what he has said, and I commend him in other ways as well. I commend him for his election result, which we all watched with interest, and I am happy to commend him for his Lancastrian roots. However, I have to disagree with his choice of football team. I am afraid that he is a Blackburn fan—which is a little way down the road from my own home town—but he cannot be perfect.
	The hon. Gentleman has raised some important questions in this debate. I want first to set out the national approach, and then to consider the situation in Cumbria. I shall then try to address some of the specific points that he has raised. It is well known that the Government are committed at national level to addressing the need for more affordable housing. The background to the problem is deep rooted and long standing. Let me give a couple of statistics. Over the past 30 years, the number of households has increased by 30 per cent., but in the same period the number of new homes built has fallen by 50 per cent. That has widened the gap between demand and supply, so there is little wonder that the long-term house price trend is so much higher in this country than in others. That, of course, is set out in the Barker report, which is extremely important for the Government and for the country.
	On the supply side, we have, as is known, a strong strategy to increase housing supply, which is set out in the communities plan. Much public comment has been made on that plan delivering results in London and the south-east. I should put it on the record that there was a 36 per cent. increase in the number of new homes being built per year between 2001 and 2005, combined with increased densities in house building—it is important that that is achieved—and a significant increase in re-use of brownfield sites. There are those who say that the policy is to build over England's green and pleasant land, but that is a cliché that perhaps makes for an easy headline and it is not borne out by the facts. The hon. Member for Westmorland and Lonsdale has not accused us of doing that, although others have.
	This policy is addressing one cause of the affordability problem, which is that, over several decades, we simply have not built enough new homes. The underlying reasons for the increasing number of households are well known and they include more single people and longevity. Let me again put it on the record that Government policy is in favour of longevity. This is a good thing, not a bad thing, but it presents us with some difficulties.
	On the other side, however, a range of measures are necessary in addition to a stable market and increasing supply. Since 1997, we have doubled the investment in affordable housing for rent or purchase, and £5 billion will have been spent over the three years to 2006. That investment will support the delivery of our new range of simpler, more affordable, more accessible home ownership schemes.
	In the short term, through our new homebuy scheme, we will help more than 100,000 households—that is a lot of people, not just 100,000 of the population—to own their own home by 2010. Homebuy will provide a flexible shared equity-based product, which will increase access to home ownership for those priced out of the market. It will also provide opportunities for social tenants to buy a share in their home. Homebuy will reinforce the longer-term strategy by increasing home ownership opportunities for key workers and other first-time buyers now.
	Empty homes are also a factor in contributing to an adequate supply. Over the last decade, the number of vacant dwellings has dropped by nearly 180,000, but there are still 690,000, according to the latest figures, which are from 2004. There remains more to be done, which is why we have recently provided local authorities with a new weapon in their armoury—empty dwelling management orders. I would encourage all hon. Members to pay attention to this bit, because their advice surgeries will be full of complainants, such as landlords who have been abusing their position, who want their help.
	Empty dwelling management orders support the efforts of local councils to get empty dwellings back into use. There are also tax incentives to support the use of space above shops, the conversion of properties and the renovation of properties that have been empty for three or more years. I hope that there is support for the orders across the House, although it impossible to say whether the official Opposition support them. They have probably gone to their second homes, and I hope they are paying 90 per cent. council tax on them.
	Many initiatives focus on the urban areas where key workers and first-time buyers have found it difficult to find affordable housing, but rural areas have not been, and will not be, overlooked. Current schemes are designed to be flexible enough to respond to the needs of rural communities as well as urban ones. Second homes, for example, are often of particular concern. We have heard the stark statistics—I pay tribute to the hon. Gentleman for putting them on the record—and other rural areas face similar problems.
	Since last April, councils have had the option to reduce the 50 per cent. council tax discount on second homes to a minimum of 10 per cent. We understand that many authorities have chosen to do so—we are not saying that councils must do so, but they have that choice, depending on their local circumstances. I wish that some of the newspapers that, under the Freedom of Information Act 2000 introduced by the Government, report the allowances of Members of Parliament, would point out that those of us who have second homes in fact voted to increase our own taxes quite substantially—I am not sure whether all Members realised what they were doing at the time. It is perhaps not a flippant point, Madam Deputy Speaker, and I have wanted to put it on the record for over a year now. I thank you for allowing me a wide berth on that.
	To return to the debate, the Rural Affordable Housing Commission, established jointly by the Deputy Prime Minister and the Secretary of State for Environment, Food and Rural Affairs, is now examining issues, problems and solutions across the country in rural areas, and will make recommendations based on good practice. Elinor Goodman, chair of the commission, was at a well-attended seminar in Keswick last week as part of the Commission for Rural Communities' housing inquiry. The hon. Member for Workington (Tony Cunningham), whose constituency is affected by this debate—and who, I am delighted to see, is in his place—says that he was delighted to see that, and I welcome his support.
	The hon. Gentleman made a point about self-invested personal pensions, on which there were a couple of interventions. I believe that there is a deep misunderstanding on this matter. He referred to an "unintended consequence" of my right hon. Friend the Chancellor's policy. I must tell the House that very little if anything that my right hon. Friend the Chancellor does is unintended or not thought through. There are limiting factors in relation to SIPPs. We do not believe that the transfer of a pension fund into property will have the negative impact to which he refers. People who go for SIPPS and see property as a form of investment are a tiny minority. Under the scheme, one does not buy a second home as part of one's pension and use that second home as a holiday home or whatever; the property is owned by the pension fund, and any call on that property is paid out of the pension fund.
	Of course, the hon. Gentleman will raise the question of enforcement, which is an important point, but we do not believe that the concept of SIPPs will lead to the sort of consequences that he and the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) fear. Responsible financial advisers and other commentators are making it clear that SIPPs is likely to be an attractive option only for a minority and will not produce substantial changes in behaviour.
	Let me turn to the meat of the debate. Clearly, Cumbria is one of the most beautiful parts of our country—it is not the most beautiful constituency, but it might be the second most beautiful—[Interruption.] Perhaps it is the third most beautiful. I shall not start a bidding war.
	It is clear that unique challenges are involved in trying to provide affordable homes for local people in the Cumbria area. Owing to the attractiveness and quality of life on offer in the Lake district and surrounding areas, demand for housing is extremely high, much of it coming from outside the immediate area. The link between local income levels and the cost of housing has been broken. and for many years local people have struggled to find a place on the property ladder.
	The Government have been concerned for some time about the position in Cumbria, and are committed to doing what they can to help. My right hon. Friend the Deputy Prime Minister has taken a personal interest in the matter, and has met local stakeholders twice to listen to their concerns and recommend new approaches to tackling the issue. That reflects his long-standing personal commitment to the Lake district and its surroundings.
	Since those meetings, the Government office for the north-west and the Audit Commission have been working closely with local authorities and registered social landlords in Cumbria to promote a more strategic approach to affordable housing provision. As a result, a group of the county's local authorities known as the Cumbria strategic housing group have succeeded in attracting an additional £4 million from the North West Regional Housing Board for 2005–06 specifically for the provision of new homes in the area. That reflects the high priority that the board gives affordable housing provision in the new regional housing strategy, and is in addition to the mainstream Housing Corporation investment of over £20 million for new affordable housing in Cumbria in 2004–06.
	No one is suggesting that local partners have been inactive. For example, South Lakeland district council has dedicated its increased council tax receipts from second home owners—a consequence of the change on which the hon. Gentleman was gracious enough to congratulate the Government—to the provision of affordable housing. As a result, the council expects to invest around £950,000 this year in a variety of schemes, including funding for the improvement of properties and their conversion to affordable housing for rent.
	However, although finance is clearly important, this is not simply an issue of public funding. The new planning policy statement 3 on housing, due to be published for consultation shortly, will strengthen our ability to provide affordable housing through the planning system. That is a postcard that the hon. Gentleman can take home with him. Officials at the Government office for the north-west have been working with Cumbrian local planning authorities, encouraging them to make the maximum use of existing planning powers to secure affordable housing.
	The forthcoming joint structure plan for Cumbria and the Lake district proposes a new policy requiring 50 per cent. of new homes built outside the national park area to be affordable, and 100 per cent. of new homes built inside the national park to be secured in perpetuity either for occupation by local people or as social housing. The structure plan also proposes to introduce the concept of allocating sites specifically for social housing in the national park. This is the first time that that approach has been adopted in Cumbria. It extends the existing "rural exception sites" approach, which is a familiar route for the provision of new affordable housing. The revised structure plan is due to be adopted in January 2006.
	We should not focus entirely on new housing. The Government's commitment to providing decent homes by tackling the huge backlog of under-investment in our housing stock is also having a significant impact in Cumbria. Additional public-sector investment of £21 million has been supplemented by a further £85 million of private-sector investment. That has helped to ensure that by 2010 Cumbria's social rented housing will meet the decent homes standard.
	I hope that the hon. Gentleman, the hon. Member for Workington and other Cumbria Members with a direct interest will welcome the joint structure plan.
	The hon. Gentleman asked whether we could find ways to change planning law and to provide a cap. As I said, the new policy consultation will propose some changes. I am not sure that his scheme is workable, but I invite him to respond to the document.
	The Government and the regional housing board are only too aware of the need to continue our push to provide affordable housing in Cumbria. We need to maintain sustainable, balanced, mixed communities where people on lower incomes—especially the young and the old—can access local housing at reasonable cost. The longer-term impact on local services and the rural economy will be severe if people on even average incomes are no longer able to afford to live and work in those communities. We are committed to a varied set of actions to address what is undoubtedly a complex issue. With the help of local partners, the regional housing board, the Housing Corporation, local planning authorities and others, I am confident that we can continue to deliver real progress for the people of Cumbria.
	Question put and agreed to.
	Adjourned accordingly at eleven minutes past Three o'clock.